Mish's Global Economic Trend Analysis |
- Herman Stekler Award for Bold, Inaccurate Recession Forecasting: 2015 Lakshman Achuthan of ECRI; Mish 2016?
- Market Rallies then Fades on News Yellen Expects Hikes This Year; Futures Still Imply No Hikes
- Tracking the Implosion of Brazil; Be Careful of What You Wish; Perfect Storm; Email from Brazil; More Intervention Madness
| Posted: 25 Sep 2015 12:59 PM PDT I received a nice email today from Prakash Loungani. He gave a presentation at the Federal Forecasters Conference yesterday. His presentation was on the inability and unwillingness for forecasters to predict recessions. Loungani says that to get forecasters to predict recessions (even inaccurately) we should have a Stekler Award for Courage in Forecasting. The award would be in honor of noted forecaster Herman Stekler who has always insisted that forecasters should predict recessions early and often and that he himself has predicted 9 of the last 5 recessions. The 2015 award would go to Lakshman Achuthan of ECRI, who called for a U.S. recession in 2012 in September 2011. ECRI recently admitted that the call had been a false alarm but gave a detailed and useful explanation for why it made the call. I am in the running for the 2016 award because in January, I predicted that Canada and the U.S. would slip into recession this year. The slides are quite funny. Click on the right and left arrows, not the down arrow. Link if slideshow does not play. Herman Stekler Award for Inaccurate Recession Forecasting Related Links
Mike "Mish" Shedlock |
| Market Rallies then Fades on News Yellen Expects Hikes This Year; Futures Still Imply No Hikes Posted: 25 Sep 2015 12:16 PM PDT Stocks Rallied a bit today on news that Yellen still expects a hike this year, but have since given up those gains. S&P 500 10-Minute Chart  Reuters reports Wall Street Up on Yellen Comments; Health Stocks Drag Nasdaq U.S. stocks were higher in early afternoon trading on Friday after Federal Reserve Chair Janet Yellen said she expects interest rates to be raised this year, easing concerns about slowing global growth and prompting a rally in bank shares.If the above chart holds the story after the closing bell will look like this: "Wall Street Down on Yellen Comments". Futures Still Imply No Hikes A quick check of CME Fedwatch shows the Fed Fund Futures gave a big yawn to the notion Yellen is going to hike.  Fed fund futures did not change a bit. The CME still has the probability of a hike at 35%. Bear in mind, those odds reflect a quarter point hike. I am of the opinion the Fed will hike in eighths, or possibly quarter point ranges starting not with a hike from the current 0%-.25% to .25%-.50%, but rather a hike to the range .125%-.375%. That of course assumes the Fed will hike at all. If Yellen wanted to convince the market she was going to hike, she should not have given the market a litany of 10 reasons the Fed did not hike at the last meeting. Mike "Mish" Shedlock |
| Posted: 25 Sep 2015 02:16 AM PDT Perfect Storm Reader Lucas from Brazil writes about the "perfect storm". Hello MishPetrobras  In classic bubble action, shares of Petrobas went from $4 to $77 back to $4. Executives no doubt, cashed out at every opportunity. Brazil Real  The Brazilian Real went from 1.6 to the US dollar to 4.1 to the US dollar. That's a decline of about 54% . Brazil 1-Year Government Bonds  Since 2007, the yield on 1-year Brazil government bonds went from just over 7% to over 16%. Flashback March 2012 Please note the inserts on the second two charts. I highlighted the March 2012 candle because that's when Brazil Declared New Currency War on US and Europe. "When the real appreciates, it reduces our competitiveness. Exports are more expensive, imports are cheaper and it creates unfair competition for businesses in Brazil," said Guido Mantega, the finance minister who was the first to use the controversial term "currency war" in 2010.Be Careful of What You Wish It was just a few short years ago that Brazil was bitching about the strength of the Real. Brazil got its wish. More Intervention Madness On Thursday, we learned Brazil Real Mounts Biggest Rally in 7 Years on Intervention Suggestions The Brazilian Real rallied nearly five percent Thursday following statements by the country's central bank president, which stated that he will explore the use of foreign exchange (FX) reserves to defend the currency against persistent declines versus the US Dollar. Brazil Central Bank (BCB) President Alexandre Tombini mentioned that different options will be used to stabilize the currency. Options that may be employed include swap contracts and dollar repurchase agreements.What If Intervention Fails? One day proves nothing. I have a simple question for Brazil: What if intervention fails? If Brazil blows all of its reserves defending a pseudo-peg that cannot be maintained, it will find itself in very dire straits. Untenable currency prop jobs are the way to ruin. Ask Argentina; Ask Russia; Ask China who recently tried and failed to prop up its stock market. Heck ask Switzerland who recently had to abandon its peg to the euro. The only thing that will stabilize the Real is sound economic policy and a stable government. Until then, there is no question. Intervention "will" fail. Mike "Mish" Shedlock |
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